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Actually, that’s true. In the 60 years since 1950, the country that has experienced the greatest percentage increase in per capita income is not China. It’s not India. It’s not South Korea. It’s Equatorial Guinea.

Where per capita income in Equatorial Guinea was $540 in 1950, today it’s over $22,000. Wow. More than 40 times as much. By that measure Equatorial Guinea is today the world’s 28th wealthiest country.

The conclusion that follows is obvious: Because Equatorial Guinea is the winner of the global growth race, all countries seeking to prosper should adopt its economic and social policies. First, install a ruthless tyrant. Second, find a large deposit of oil. (It’s actually OK if you find the oil first; the tyrant will follow.) Then make sure that you concentrate wealth in the hands of few sick-minded lackeys. And finally, for good measure, deprive the overwhelming majority of your population of basic human rights and zero-out entrepreneurship.

Sound good? No, of course it doesn’t. It sounds bad.

Now why draw attention to this obviously meaningless statistical anomaly? The reason is that the story of Equatorial Guinea offers a stark reminder that there is more to prosperity than the growth of per capita income. And the “more” doesn’t only consist of taking into account inequalities of income and wealth. It also consists of taking into account the actual work that is done to generate the income and wealth to begin with. (For more on this, see the excellent recently published monograph by Umair Haque titled Betterness.)

In comparing Equatorial Guinea with, for example, South Korea—the country that has experienced the second highest growth rate of per capita income over the past 6o years—looking only at wealth distributions misses the point almost entirely. The real story has to do with the explosion of productive potential on the southern half of the Korean peninsula. The people of South Korea haven’t just succeeded in making their country wealthy over the past six decades. They have done something more difficult, and ultimately more rewarding: they’ve made their country innovative. (Different policies were enacted in North Korea 60 years ago, I hasten to add, with economic outcomes there decidedly worse as a consequence. Lesson: policies do matter.) Across the “developing” world—not only in Asia, but in Africa and Latin America as well—other countries are doing the same. All indications point to the next quarter century as being unprecedented era of entrepreneurship and innovation on a global scale.

The path to an entrepreneurial and innovative society is the topic of a new report jointly published by the Information Technology & Innovation Foundation and the Kauffman Foundation. (I am a senior fellow this year at the Kauffman Foundation, on leave from George Mason University.) The report introduces “The Global Innovation Policy Index,” a methodology for measuring a nation’s success in implementing policies conducive to innovation. The index is comprised of seven categories of indicators:

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I agree that South Korea has done great things. It is the best national success story of the past half century. However, if you compared South Korea’s policies in the take-off era of Park Chung-hee (1960s and 1970s) with the seven points listed in the index, you may be surprised. Though they did invest heavily in R&D (great schools like KAIST, KDI, etc), they did very little else on the list. Markets were heavily dominated by state-supported chaebol, mercantilist tariff policies meant competing goods from abroad didn’t get through, successful genuine entrepreneurship (ie. non-chaebol) was also virtually impossible due to the conglomerate stranglehold, intellectual property rights were most definitely not respected, government procurement was done behind closed doors and contracts handed out to members of the usual club, and regarding high-skill immigration, it was pretty much one-way traffic in the other direction.

Yes, thanks for pointing that out. Quite right about the policies in South Korea, of course. In this piece I don’t address the contrast you point out, but I do take it on in chapter 9 of The Coming Prosperity. It’s fair to say that * we have varying levels of confidence in the effectiveness of each of the elements on the ITIF policy list above, and * countries have managed not only to grow, but to prosper, in the past despite having gone the opposite direction along one or more of the policy dimensions emphasized in the ITIF report.

One question additional question for South Korea is whether the approaches that have served the country well in the past (during a capital deepening phase of economic and societal development) will serve it well in the future (during a continuous innovation phase of development). Tensions in the old model have been evident for some time now. And young Koreans appear to have have a very different outlook than their grandparents did. So it will be interested to see how that plays out.